Double-checking your monthly financial numbers is one of the most common accounting practices shared by large and small businesses because of the headaches -- or worse -- that incorrect bookkeeping can cause you. Whether it's a bank error or your own mistake, performing the simple task of a bank reconciliation each month can prevent you from irreconcilable problems later that require reviewing months of records.

Step 1

Get a copy of your monthly bank statement and a copy of your checkbook, general ledger or other document you use to track and record your monthly income and payables. Use only documents that provide information on money received, not invoiced, earned or billed, and money paid, not promised or contracted.

Step 2

Review the starting balance recorded in your general ledger or checkbook and compare it to the starting balance on your bank statement. If they don't match, quickly determine if you can find the discrepancy. Determine if you need to do a reconciliation for the previous month if you can’t find the difference between your bank statement starting balance and your ledger or checkbook starting balance.

Step 3

Review the ending balance recorded in your general ledger or checkbook and compare it to the ending balance on your bank statement. If they don't match, quickly determine if you can find the discrepancy. Often, the difference is any interest you’ve earned or fees you’ve accrued. Sometimes, the difference corresponds to a check or deposit amount you can quickly find.

Step 4

Compare the total monthly deposits number in your ledger or checkbook against the total deposits on your bank statement. Compare the total monthly checks, online transfers or other payments in your ledger or checkbook against the totals paid on your bank statement. If these numbers match, you might not need to review each transaction you made during the month if you're comfortable with your numbers. It might be coincidental that two payments or two deposits with the same amount were recorded incorrectly, so even if your ledger or checkbook totals match your statement totals, you might still want to verify each transaction.

Step 5

Note if any transactions in your general ledger or checkbook don’t appear on your monthly bank statement, even if your monthly total numbers match. This often occurs when you make a payment or deposit toward the end of the month. For example, if you write and mail a check on January 28, it might not be received and deposited by the payee until the first or second week of February. If you make a deposit the afternoon of the last day of the month, it might not appear until the next month’s bank statement. It’s possible that a previous month’s payment or deposit is the same amount as a payment or deposit in this month’s records, causing your checkbook and bank statement end-of-month balances to match.

Step 6

Subtract any deposits you’ve made that don't appear on your bank statement from your total deposits recorded in your checkbook or general ledger and see if this new total in your ledger or checkbook matches the total credits number on your bank statement. If so, you have reconciled your deposits. Subtract any payments you made that do not appear on your bank statement from your total payments recorded in your checkbook or general ledger and see if the total in your ledger or checkbook matches the total debits number on your bank statement. If so, you have reconciled your payments.

Step 7

Review the bank statement to determine if you have earned any interest or have paid any annual, late, overdraft or other fees. Add any interest you’ve earned to your checkbook or ledger income balance to get your new total income number. Add any fees or other payments to your checkbook or ledger payments balance to get your new total payments number.

Step 8

Add your income, including interest, as reflected in your bank statement, to the beginning balance in your ledger or checkbook. Subtract any income from this balance not recorded on your bank statement. Subtract the payments and fees recorded in your statement from this number, then add the amounts of any payments in your ledger or checkbook that do not appear in the statement. If this total matches your ending balance on your bank statement, you have reconciled your books. If these numbers do not match, review each transaction again.

References

About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.